In my morning paper I read that teams of software writers at University College, London and the Bank of England are presently devising a new digital currency. Called RSCoin, itt would have the virtues of Bitcoin — ease and cheapness of money transfer from person to person — without its big disadvantage to governments — money transactions that are invisible to anybody but the transactors.
What UCL and BoE are proposing would be similar to Bitcoin, except that the comprehensive ledger of its currency movements would not be spread around among all users’ computers and smartphones — thus making the currency counterfeit-proof — but would be lodged exclusively with the central bank — thus making all transactions visible to governments for taxation and other purposes.
They are planning a trial in 18 months. Dr George Danezis, heading the university team, has says that, “My advice is that companies should play close attention to what is happening, because this will not go away. . . There are Visa, Master and PayPal. These are the sorts of guys we are to disrupt.”
Such a currency would also reduce a great deal of banks’ transactional services for their customers. If it comes off, RSCoin would be a major disruptive technology by which, as Schumpeter used to say, the world economy takes a leap forward.
But will RSCoin take off? It’s hardly likely — at least as Dr Danezis envisages it — because it would have to be a world-wide currency. The idea that the individual central banks of all the countries of the world would submit themselves to the ledger held in one controlling central bank simply wouldn’t happen.
Governments, as a scaled-up versions of man’s intensive ‘groupism’ are fiercely territorial and always competitive. Agreement between them has to be something of huge mutual importance, and then usually only of a provisional or temporary nature — but giving up currency sovereignty, never !
What could happen, however, is that if a monetary catastrophe worse than 2008 came along and this time paralysed world trade — which the 2008 debacle was within two days of doing so — then if some of the largest multinationals were to impose something like RSCoin on tbeir customers and suppliers then governments would have to make sure that the exchange value of their traditional currencies didn’t go out of line with that of RSCoin.
That could be established very quickly just as soon as food, priced in RSCoins, reached the supermarkets.